2013: Year of the Mega Deal

By: Benzinga

Posted: 2/15/2013 7:22:00 AM

Referenced Stocks: AAMRQ;APKT;CPNO;DELL;SPY

Just one and a half months into 2013 and it already appears as
though 2013 will be the year of an M&A boom. Analysts have been
calling for a surge in mergers and acquisitions for years now, due
to cheap financing rates.

However, now that the equity prices have risen to new multi-year
highs, sellers are beginning to feel more confident that they are
not selling at bargain basement prices. As long as prices remain
strong and financing cheap, 2013 could very well be the year of the
mega deal.

Buffet's purchase of Heinz was not a normal Buffett deal,
though. Buffett partnered with private equity firm 3G Partners in
the deal and, unlike many Buffett purchases, the deal involved a
significant amount of leverage. Buffett's move into debt financing
for deals shows the true underlying strength of the M&A market,
especially as he is one of the more conservative investors in the
market who rarely likes to use leverage in buyouts.

So far through just one and a half months of 2013, the top ten
deals have surpassed the top ten deals of 2012. They are:

Notably in those ten deals are the three mega deals already to
have taken place this year. With cheap financing, high equity
prices (meaning an increased willingness for owners to sell), and a
healthy M&A market, more deals could come. One notable deal
that has been rumored for nearly one year is the management buyout
of Best Buy (NYSE:
BBY
). Over the summer, sources thought a deal was close only for
discussions to break down.

It is important to note that the recently announced management
buyout of Dell is not closed yet and is facing lots of shareholder
rebuffs. Notable activist investor Southeastern Asset Management
said it would vote its shares against the deal and other
institutional shareholders have joined the chorus of those against
the deal in recent weeks. The final vote will determine whether the
deal goes through.

It should also be pointed out that added to the list of
acquisitions should be the merger of American Airlines (
AAMRQ
) and United Airlines, which together creates the largest airline
in the U.S. Once again, the cheap financing, the good selling
prices and a health M&A market should make 2013 the year of the
mega deal. So grab your popcorn, because this is going to be one
heck of a show.